Xiaobao's online shopping can't save the peak season, Amazon sellers are entering a cold winter

The sellers who had been disappointed for a long time because of the slow peak season finally found some happiness on Online Monday.

Sellers breathed a sigh of relief, but it is a fact that the peak season is not hot today, and the small peak of the big promotion cannot cover up the overall decline. For sellers, internally, compared with last year, the number of orders and profits have collectively declined, and the costs of advertising and warehousing have skyrocketed; externally, Temu, SHEIN, TikTok shop and other rival platforms are surrounding them, and Amazon's traffic has been diverted at an accelerated rate. Sellers are restless, and small and medium-sized sellers are even more frightened - they will be the first group to be impacted.

How should we cross borders in the future?

A small hit on the Internet, but it can’t keep the peak season hot this year

Compared with the lukewarm Black Friday, this Cyber ​​Monday did surprise many sellers.

"It's better than Black Friday. It's only been half a day and the online shopping day is already twice as good as Black Friday."

"The last few hours were so intense that for some accounts, one order was placed every 2 minutes. I never expected that."

“We put half of the activities for our important products on Cyber ​​Monday, and the performance was pretty good.”

"Net One was 4-5 times the usual amount, close to Member Day, and the second highest single-day sales volume this year, and the ads didn't explode."

Most sellers reported that Cyber ​​​​1 was better than Black Friday, and it was a small explosion; some sellers turned off discounts to protect profits, and the number of orders was half of that of Black Friday, but the profit was the same. However, some sellers were dissatisfied that the number of orders was not as good as Black Friday, especially compared with last year's Cyber ​​​​1.

Mr. Fu, a veteran seller, said frankly that this was the worst Cyber ​​Monday he had ever experienced. "Amazon's Cyber ​​Monday performance was quite disappointing. In all my years in the industry, this was the first time I encountered Cyber ​​Monday sales that were worse than Black Friday sales . This worst does not mean the lowest GMV, but the worst growth rate compared to previous Cyber ​​Mondays."

Although the results were not impressive, Black Friday Cyber ​​Monday still supported a peak in the peak season. An industry poll showed that during the Black Friday Cyber ​​Monday promotion, more than 60% of sellers had similar or only slightly increased orders, about 20% of sellers increased by 1-2 times, and only 10% increased by 3-5 times.

However, a few days of revelry cannot save the situation. The big promotion can only quench thirst temporarily. With a slight increase in the number of orders, advertising will also increase, and various expenses such as delivery fees during the peak season will be added, and profits will be worrying. The overall performance this year is not satisfactory, and the small explosion of Black Friday and Cyber ​​Monday cannot heat up this peak season.

The big sale is just the tip of the iceberg. From the overall situation, sellers this year have felt the decline in platform traffic as never before, as well as the resulting price competition and shrinking profits. This situation had already shown signs before Q4 and was further amplified after entering the peak season.

The most direct manifestation is the order volume. Many sellers said that the traffic on Amazon has dropped significantly compared with the same period last year, and the order volume has also declined:

"Compared with the same period last year, this year's orders fell by 10% and net profit fell by more than 30%."

"Orders are down 35% year-on-year. I thought I could make a push, but the storage fees have wiped out a lot of profits."

"Order volume dropped by 10%, net profit fell by 50%, but we are still holding on."

“Sales volume increased by more than 30% year-on-year, but sales revenue did not change much, and we are going further and further on the path of charity.”

"Monthly sales increased by 60% year-on-year, but profit margins dropped significantly. Discounts and advertising expenses were higher than last year, and subsequent financial statements are not expected to look good."

Seller @Amazon美刀 said that compared with the same period last year, the ranking of the small category of links that are popular with individual companies has hardly changed, but the orders have decreased by 30%. "The status of our links on Amazon has not changed, so the impact on the orders may be the status of Amazon."

This contrast is more obvious during the peak season. Until Halloween, sellers did not feel the peak season atmosphere of the past. Some sellers' orders fell by 25% compared with October last year, and there was excess inventory. In previous years, during the peak season, big sellers ate meat and small sellers drank soup, but this peak season, big sellers still ate meat, but small sellers can hardly even drink soup.

In fact, compared with the unsatisfactory performance of Black Friday and Cyber ​​Monday, sellers think that what is more frightening is that the much-anticipated November-December boom in previous years turned out to be mediocre this year. Sales in November did not even increase significantly compared to October. On the other hand, advertising and storage fees hit new highs, resulting in profits far below expectations.

Secondly, there is serious price stampede.

Many sellers insist on using Amazon as their main battlefield. In addition to the large market share of the platform, another reason is that the prices on Amazon are slightly higher and the profits are more lucrative. In fact, the prices of products on Amazon are not that high. According to Profitero's research, compared with major retailers in the United States, Amazon's online prices have been the lowest for seven consecutive years, 16% lower than its competitors on average.

This year, the price has been lowered even further. A seller said that this year's new product was launched in the peak season and was priced at $139.99. In just three months, the price of the same product has generally dropped to $39.99. The market competition is shocking. At present, every sale will result in a loss of 200 yuan, and if it is directly abandoned, the loss will be even greater.

Many categories are experiencing price cuts, and top links are also seeing significant price cuts. "Clearance sellers in the furniture category on Amazon are even more ruthless, offering items for free, leaving them with nothing after deducting the final shipping costs. Even with this, sales are still struggling to pick up, and they still have to face high long-term storage fees," said a seller.

As the coupons offered by each other are becoming increasingly unprofitable, some sellers in the same industry have reached a compromise and negotiated to reduce the number of coupons offered.

The price is lower, and the order volume is not as good as last year, so the profit will naturally plummet. "In the past, the gross profit was 20% during the peak season, but this year it has dropped to 15%. The storage fee during the peak season plus the delivery surcharge have caused the gross profit to plummet." Sellers said that similar situations are very common.

Advertising is a major factor that drives down profits.

This year, the CPC of core keywords on Amazon has been rising. For example, it is almost impossible to find new products with a bid price of less than $1 and a conversion rate of more than 10%. A seller posted an advertisement showing that the CPC of products priced at more than 10 or 20 US dollars has reached a sky-high price - ranging from 40 US dollars to over 100 US dollars, which made a group of sellers call it "horrible".

Most sellers think this is the result of being too competitive, but why can’t high advertising costs bring reasonable conversions? Because Amazon may be “flooding”.

In a recent antitrust lawsuit against Amazon, the U.S. Federal Trade Commission ( FTC) pointed out that Amazon's search results pages are filled with a large number of irrelevant "defective" ads, that is, ads that are irrelevant or only somewhat related to the content users search for.

The FTC said Bezos instructed executives to "accept more defects" to increase the total number of ad impressions and increase Amazon's advertising profits. The proliferation of junk ads caused more relevant search results to be squeezed out, replaced by some products that were obviously inconsistent with the search content, such as when searching for "Seattle Seahawks T-shirts", Los Angeles Lakers T-shirt ads appeared.

The result of allowing inaccurate advertising is that buyers spend more time, sellers spend more promotion fees, and Amazon earns more advertising fees. At the same time, because advertising data is shrouded in fog, it is difficult for sellers to capture the real data response, and the subsequent delivery costs will be further increased.

Next, many sellers will face inventory problems.

The peak season atmosphere was still not strong until mid-November. Sellers predicted that the industry would start a crazy clearance mode after Black Friday and Cyber ​​Monday. Once the inventory could not be converted into cash, many companies would fall into crisis. Therefore, a group of sellers began to clear their inventory during the Black Friday and Cyber ​​Monday promotions, while sellers who still hoped for a big sales during the promotions would face the headache of inventory backlog and storage costs.

The overall performance of this promotion was not good, which was a heavy blow to the sellers who had high expectations for the event. As sellers with a large amount of inventory began to clear their inventory, the difficulty of launching new products in the first quarter will reach a new high.

Amazon's external threats intensify, and small and medium-sized sellers are affected

On the Amazon platform, sellers face multiple internal problems such as order quantity, price, advertising, and warehousing. What’s more troublesome is that this platform is facing unprecedentedly fierce competition from peers. Once its e-commerce market share is eroded, small and medium-sized sellers will bear the brunt.

"There are too many sellers in small categories now. Prices have been slashed by 50% from six months ago to now, and there are many large coupons. This is an internal problem." Seller @艾琳明月 said, "The external problem is that new platforms are dividing customers and traffic. As small and medium-sized sellers on Amazon, the living space is getting narrower and narrower, just like Taobao in China was besieged by its peers before. It is predicted that our sales will drop a lot next year."

Several new platforms have had the greatest impact on Amazon. They have not only diverted orders from Amazon, but also taken away some sellers.

Temu

Recently, an insider of the platform said that Amazon had not cared about Temu's expansion before, and only recently decided to pay attention to this rival. It is hard to agree with this statement.

Temu's offensive is fierce and growing rapidly, and the industry often mentions its impact on Amazon. This year, Amazon's page and policy adjustments are unprecedentedly intensive, such as modifying the display of product reviews, etc. Among them, the low-priced commodity logistics rates that replaced the light and small commodity plan are generally considered to be a move to respond to Temu's low-price strategy, with the purpose of making light and small commodity sellers lower their prices.

Temu has become a new sales channel for many Amazon sellers, and its status has also changed from "delivery only" to "embracing change". A seller revealed that the sellers around him who used to work on self-delivery platforms such as Wish have almost achieved an average of 10,000 orders per person here.

It also absorbs sellers overflowing from Amazon. A leading home appliance seller was defeated in the Amazon account ban wave. In the first half of this year, he opened Temu. There are fewer sellers in his category and the price is not much lower. Under the "brand power + mature sellers + compliant products" model, the sales volume quickly increased. Now the company has devoted all its efforts to Temu, and the sales from Amazon have almost returned to zero. In his opinion, this is a platform that can restart old brands.

Low prices are Temu's "axe", but not a "foot-binding cloth". The seller said that the platform has begun to move towards high-end products, for example, it has released high-priced products that buyers previously did not approve, and it is expected to cover all categories and price ranges in the future.

Temu is still adjusting its strategy. Recently, it has cooperated with shipping companies such as Matson, Zim, CMA CGM, Maersk, and COSCO Shipping to solve cross-border e-commerce logistics problems through ocean freight. This news sends two signals: 1. Temu's logistics costs will be reduced, and more funds can be used for promotion; 2. The platform will cover large products such as home furnishings, impacting the sales of more categories on platforms such as Amazon, and has already started to attract investment for large products.

SHEIN

Last year, SHEIN topped the overseas e-commerce download list with more than 170 million downloads. It has a high reputation and a large user base. Therefore, after it opened recruitment on third-party platforms, the industry was very enthusiastic about opening stores. Some sellers reported that they could get orders quickly and sell at high prices.

Kong Lin, a domestic children's clothing merchant, joined SHEIN in July and was selling 3,000 pieces a day by September. Some sellers are also gradually gaining strength. "Our orders from SHEIN are slowly increasing. It took one month from 0 to 100, and only one week from 100 to 200," said a seller.

An intuitive data can illustrate how big the impact of the new platform is. According to data.ai, the number of users from Chinese e-commerce platforms such as SHEIN and Temu has increased dramatically in the United States. In October, the total number of users of these two apps increased to about 110 million, a four-fold increase in one year, approaching 90% of Amazon in the United States. Currently, the new downloads of the two apps in the United States have reached nearly five times that of Amazon.

TikTok Shop

TikTok Shop launched a fully hosted model and opened up small stores in the United States, becoming a dark horse in social e-commerce.

The FastMoss data platform shows that there are currently more than 250,000 merchants in TikTok Shop in the United States, with daily transaction volume exceeding US$10 million; it is reported that the GMV target for TikTok Shop in the United States this year is US$5 billion.

During the Black Friday pre-sale of TikTok Shop in the United States, sales of many brands reached 300,000 US dollars or even higher in 3 days, and a furniture brand directly exceeded 1.5 million US dollars. Sellers who saw the data were impressed, is TikTok Shop so powerful? One seller directly replied: This platform is now a time to "pick up money".

When TikTok Shop took decisive action, Amazon was still hesitant. Marketplace Pulse analyzed the push-and-pull battle between the two. TikTok is an all-out action-oriented company. Although some users are dissatisfied with the ads brought by TikTok Shop, which affects the user experience, TikTok is indeed actively promoting the shopping function in the app.

Amazon, by contrast, has been developing its own social shopping app for nearly a year through its Inspire feature, which lets users swipe through videos and photos promoting various products. But like many of its other features, Inspire has failed to take off, and it’s hard to imagine many users watching Amazon Live, let alone giving up TikTok for Inspire.

Some Amazon sellers have made a name for themselves on TikTok. For example, Wyze, an Amazon-native brand that specializes in cameras, sold nearly 40,000 items priced at $33.99 on TikTok in 30 days.

Both are interested in developing social e-commerce. TikTok has taken lightning action, and users may be dissatisfied with shopping push notifications; but Amazon has remained silent in this area because many users don’t even know the existence of Inspire. Given the user base of over 1 billion, the industry believes that it is only a matter of time before TikTok Shop surpasses Temu and others.

All competitors have used all kinds of tactics to gain territory, but Amazon is not sensitive to the current changes. Not only has it not taken sufficient action to maintain its market share, it has even directly directed traffic to competitors such as Temu and Walmart on its platform, provided APP download channels, and handed users over to them step by step. This operation shocked the sellers: Is Amazon overconfident or too inactive?

But we cannot rule out the possibility that the emergence of new platforms has disrupted Amazon's rhythm.

This is the only year in the past six years that Amazon has not launched a new site. According to the plan, Amazon was going to launch new sites in Chile, Colombia, Nigeria and South Africa at the beginning of this year, but these sites were either suspended or launched and none of them went online this year. Perhaps it was external pressure that made Amazon press the pause button on expansion.

Cross-border e-commerce is still on the rise, what should sellers do?

Amazon has a leading market share and a complete logistics infrastructure. It will not lose its leading position in the short term and will remain a key operating platform for sellers. However, the situation is changing rapidly and sellers still need to be prepared to respond.

1. Profit first

Seller @萧闻秋 believes that in the future, Amazon sellers should only put profits first. The so-called strategic losses must set up stop-loss points. Small and beautiful must be implemented in a practical way, and cuts must be made when necessary. The ultimate result of coveting the illusion of scale will definitely be a crash. At the same time, expectations should be lowered, and Amazon is no longer the hot spot it was ten years ago, but is closer to traditional industries - heavy assets, slow turnover, low returns, and high risks.

"The key to becoming an Amazon brand is still in product selection, or in other words, it must evolve to product development. We must abandon the mindset of simply moving products, and be more refined in differentiation. We must migrate scenarios and elements, and dare to increase added value. For example, we must discover the emotional added value that a specific group of people attach to a product, quickly run through an exclusive model, and accelerate iteration. We must also do social media and single-point penetration."

2. If you can’t beat them, join them

In addition to continuing to deepen product categories on Amazon and strengthening barrier building from the product and supply chain sides, sellers can also join this disruptive platform.

On several new platforms such as TikTok Shop, many sellers have achieved impressive results by running through the model. Sellers can also choose the right platform based on their products and develop new sales channels. This can not only reduce dependence on Amazon, but also seize opportunities on other platforms. Even listed companies in the industry are working hard to increase the proportion of revenue from other platforms and reduce the performance proportion of Amazon channels.

But for smaller sellers, sticking to Amazon is still a relatively stable option.

3. Accumulate private domain traffic

Some sellers believe that the development of cross-border e-commerce can refer to the situation of domestic e-commerce. For example, many sellers who have done well this year did not rely heavily on platforms, but instead used content to generate private domain traffic. "The future direction of cross-border e-commerce is also here. If you still switch platforms back and forth and don't try to create content, you will become more and more tired."

Overall, the cross-border e-commerce industry is still on an upward trend.

On the one hand, the overseas e-commerce market is still expanding. As for the largest market, the United States' e-commerce spending was $1 trillion in 2022. This year, its e-commerce grew by 7% to $1.1 trillion, and e-commerce spending is still greater than the pre-pandemic forecast level. In the next few years, the growth of US e-commerce will accelerate, and the growth rate is expected to reach 9%-10%.

On the other hand, domestic sellers have seized the opportunities of global e-commerce development. Taking the industry highland as an example, in the first 10 months of this year, Shenzhen's cumulative imports and exports reached 3.16 trillion yuan, a year-on-year increase of 6.4%. Among them, exports reached 2.02 trillion yuan, an increase of 14.4%. During this period, Shenzhen's cross-border e-commerce imports and exports have exceeded last year's 200 billion yuan, a year-on-year increase of 76.48%.

The market pie is still getting bigger, but sellers need to be quick and agile to get a piece of it.